MicroKing Finance

Kiva conducts regular, ongoing monitoring of all Field Partners, but only posts status updates here in response to relevant, major changes at the partner.

Partner Description:

MicroKing Finance is one of Zimbabwe's leading microfinance institutions and provides savings and credit services to micro, small, and medium enterprises in Zimbabwe. As of the first quarter of 2011, the institution had 7 branches in Zimbabwe in Harare, Chitungwiza, Masvingo, Mbare, Mutare, Bulawayo and Gweru. MicroKing serves more than 10,000 clients with a portfolio in excess of US$7M.

The microfinance market in Zimbabwe is highly underdeveloped and continues to adjust to the new realities of the Zimbabwe economy. Prior to 2009, the Zimbabwe dollar was the only permissible currency for business transactions and was rapidly devalued from hyperinflation:

In early 2009, the Reserve Bank of Zimbabwe formally allowed the US dollar to operate as a secondary currency and, practically, became the primary currency of transactions in the country. MicroKing and it clients almost exclusively transact in US dollars as of early 2011.

During the period of hyperinflation, microfinance loans in Zimbabwe were extended for extraordinarily short terms and generally to cross-border traders. As of early 2010, loans continued to be extended over short time horizons reflecting short term financing for portfolios, concerns about continued economic and political stability, and frequent borrower business orientations to quick turnover activities

MicroKing has a long history in Zimbabwe and was originally founded in July 2001 as a division of Kingdom Bank Limited, a commercial bank in Zimbabwe, to provide high quality financial services to the under-banked but rapidly growing Zimbabwean informal sector. Since 2005, MicroKing has been 100% owned by Kingdom Financial Holdings Limited and is registered as a microfinance institution through the Reserve Bank of Zimbabwe. The organization is financed by Kingdom Bank, a sister entity, as well as via loans from Triple Jump (Dutch microfinance lender) and Mercy Corps (on an agricultural value chain project).

Kiva loans at MicroKing are unique and are only provided to group loan clients. Kiva loans have the following attributes:

This spring, MicroKing's delinquency rates became abnormally high. As a result, the organization has decided to restructure part of its Kiva portfolio. It will be re-evaluating the repayment terms of certain borrower groups to ease the burden on clients who are having difficulty repaying their loans on time.

Unfortunately, it is impossible to change the repayment schedule of a loan once it is posted to Kiva. This means that clients may show up on Kiva as delinquent, even though they are not. This is becauseMicroKing is collecting less per installment than reflected on the website. For example, a loan that originally had a 12-month repayment term may be restructured to 18 months so that the client can pay less per installment.

MicroKing's decision to restructure will affect delinquency rates in two places on Kiva:

1. MicroKing's overall delinquency rate will be artificially high.

2. MicroKing borrowers may appear delinquent on Kiva when they are actually paying back on time per their restructured payment schedules.

MicroKing attributes repayment difficulty to seasonality and low-liquidity during the months of January, February and March in Zimbabwe. During this period, many people need to pay school fees, and agricultural workers must buy inputs like seed and fertilizer. The lack of disposable cash in the market hurts Kiva borrowers who are primarily employed in retail and cross-border trade.

A Note on MicroKing’s Portfolio Yield:

We care deeply about the cost that Kiva borrowers pay for their loans, which is why fair pricing is a core part of our initial due diligence process for Field Partners. With Kiva's 0% capital, many of our Field Partners are also able to add additional value to their loans by reducing interest rates, offering non-financial services or creating new loan products.

For partners with reported portfolio yields or average APRs higher than 50%, Kiva takes steps to check that the high rates are justified by the impact of the loans. Kiva also verifies that the partner is not generating unreasonable profits or paying inflated salaries, and that the partner’s elevated operating costs are justified by its operating environment and/or the design of its loan products.

We seek to support loans that don’t impose an unjustifiable cost burden on hardworking borrowers. We nevertheless recognize that in order to reach vulnerable and excluded people with high-impact products and services, some of our partners incur high costs that necessitate charging higher-than-average costs to borrowers in order to allow for sustainability and scale. With this partner, Kiva capital is supporting a loan product that costs less than the partner's typical products.

Factors that drive up the costs that this partner organization charges its borrowers include:

• They operate in an area with a limited or poorly functioning banking system. This makes it difficult to access funding locally, and makes it more challenging to send and receive payments on loans from outside the country. • They’re based in an area with a high cost of living and doing business. This is often due to the high demand and low supply of adequate housing and goods. • They pay high interest rates on the loans they take from banks and other funders, given the market in which they operate. This means they need more support from innovative sources like Kiva to reduce costs and pass savings on to borrowers. • They operate in a market where microfinance is highly underdeveloped. This means that finding, training and maintaining qualified staff is more expensive and difficult than in more-developed markets.

Other Information Sources

MicroKing Finance's Mission Statement

To provide high quality financial services to the middle and upper levels of the informal sector and generate superior returns for all stakeholders.

Why Kiva Works With MicroKing Finance

Kiva funding has the unique potential to drive further expansion of the MicroKing portfolio in a deeply underserved market in Zimbabwe. Because many Kiva loans at MicroKing are offered to group borrowers, they are reaching a more vulnerable segment that cannot yet access individual loan products. Further, these loans have beneficial characteristics, such as a lower interest rate, a longer loan term and greater flexibility due to a grace period for repayment.